International Reference Pricing Is Back on the Agenda. Expect Headaches to Ensue

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INFLECTION POINT (1)/ International Reference Pricing Is Back. Sigh. 

Eh. Let me start at the end. 

Axios has a piece on a new white paper on all of the things that Trump could do to end “global freeloading” around drug prices. It’s from America First Policy Institute, which foreshadowed all of this in a STAT op-ed a couple of weeks ago.

Here’s how Axios’ Caitlin Owen concludes: “I'd bet that the administration is going to attempt to do something big … Why? Because the topic is getting some serious momentum, it aligns pretty spot-on with larger Trump rhetoric, and no one from the party's traditional health policy wing really has the cred to stop it, if they even want to.”

The Axios conclusion is a bet on policies such as “most favored nation” or the never-implemented “International Pricing Model” that Trump tried back in 2019. 

I can see the attraction of these solutions -- especially when they’re presented as ways to hurt other nations, not the industry** -- but the execution here is difficult:

• The AFPI report suggests that some of the policies could be implemented via CMS’ Innovation Center, where they would almost certainly be challenged in court. 

• I can certainly imagine a legislative effort to achieve some of the AFPI’s ends, though I can also imagine that it would require Republican leadership to collaborate with Bernie Sanders to get the dub here. I’m not holding my breath for Congress to go all-in on this topic.

• The paper floats the use of the IRA Medicare negotiation authority, though international prices aren’t listed in the law as a factor to be considered, and it’s hard to see how a “freeloading” lens would get much more bang for the buck than the existing statute allows. 

• Trade policy, too, makes the list, though the the specifics there would be far more byzantine. 

In fairness to Owens, her bet is that the administration is going “attempt” something, and the word “attempt” is probably carrying a lot of weight. 

Trying to promote a “global freeriding” agenda -- with little regard to the actual outcome -- might be all Trump really wants. Of course, at the end of the day … nobody knows. 

** I’m reserving the right to explore at some later date the foundational question about the impact of these policies on innovation. 

Right now, these proposals are built on the happy assumption that getting other nations to pay their “fair share” would offset any revenue loss from falling prices in the United States, leading to an overall increase in pharma profits and innovation. 

Those are tenuous assumptions, and if these policies end up as half-measures -- where U.S. prices are hit without a corresponding increase in revenue ex-US -- then industry and patients will suffer. 

My belief is that any effort to drive prices up overseas is almost certainly going to show up in reduced access in those countries, which will offset any price increases that get jammed through. There’s lots of evidence that other countries would rather go without new medicines than endure higher prices. 

INFLECTION POINT (2)/ Optum Rx Comes to the Rescue of Retail Pharmacy. Maybe.

In last week’s edition on the topics with the highest importance-to-attention ratio, I put “the death of retail pharmacy” atop the list. Since then, it seems like I’ve heard a couple hundred conversations on the topic. (It’s been quite a week.)

All of those conversations have ended in the same place. Retail is in deep trouble. Franchise pharmacies. Independent pharmacies. Grocery-store pharmacies. All are dealing with the same reality: They are underwater on brand-name scripts, and there’s not enough margin on generics to make it up. 

So I’m sure lots of eyes were on Optum Rx’s announcement that they were going to “align payment models more closely to the costs pharmacies may face due to manufacturer pricing actions.”

I’m going to leave aside the whack at manufacturers, which is a red herring or a cheap shot, depending on your tribe. At the core, Optum Rx wants to address the pharmacy-reimbursement question. They recognize the problem. That’s a good thing. 

“While trust should be earned through data and results, the words on paper demonstrate an acknowledgment of past misaligned approaches to pricing that have led them to the public frying pan,” is how Antonio Ciaccia put it on LinkedIn.

Still: There are reasons to be skeptical. 

I followed up with Antonio in an effort to figure out what Optum Rx was actually up to. His take, after a close reading of the press release, is that none of this necessarily means that Optum Rx is just going to throw more money at pharmacies as much as shift around how generics vs. brands are reimbursed, giving brands a bump at the expense of generics. 

The press release language talks about the need to “correct imbalances in how pharmacies are paid for brand and generic drugs,” and Antonio’s theory is that you wouldn’t need to drag generic drugs into the dialogue if the plan was simply to boost reimbursement for brands. 

(Some of the comments on Antonio’s LinkedIn post get at this, too.)

Still, I get the feeling that Antonio is withholding final judgment, and I’ve found it’s best to follow that guy’s lead. At a minimum, Optum Rx has correctly identified the problem. And that’s the critical first step.  

QUICK TURNS/ The Wrong Kind of 340B Debate and Questions About California

No one reading Cost Curve will be surprised to know that I have an opinion on 340B: The program needs reform to make it better at helping vulnerable Americans. I accept that there are probably different ways of getting there, and I’m willing to be open-minded about those different ways. 

What I’m not open-minded about is efforts to hijack the reform efforts to score points in some other ideological game. There is a new bill in Congress to bar 340B hospitals from using 340B profits to underwrite gender-affirming care, which has nothing to do with fixing 340B. Indeed, this is the kind of crap that is going to make it even harder to fix 340B. 

Hell, the press release announcing the legislation didn’t even get the basics right, and the amplification of the story is likewise ignorant about how 340B works. 

So I’m going to do my best to ignore this sideshow, even though I fear it’s going to be a popular way to threaten hospitals. But I want to be on the record: This isn’t helping anyone. 

ELSEWHERE: 

• I have still yet to read a definitive assessment of Blue Shield of California’s effort to replace PBM services with a more targeted best-of-breed approach. But I fear that the revolution may not be going as planned. Here is the president of Blue Shield’s parent company in Modern Healthcare: “There are several million people who get their pharmacy benefits with us, and it's a big switch. We projected an increase in call volume [during open enrollment season] because of the change, but we had much more call volume than we had expected. Other than that, we're hitting all our goals.”
  
  “Much more call volume than we had expected” feels like a red flag, no? 

• The language in this New York Times op-ed about the danger of slashing funding for science is just <chef’s kiss>: “But science isn’t a procurement process; it’s an investment portfolio. If a venture capital firm measured efficiency purely by how little money it spent, rather than by the returns it generated, it wouldn’t last long.”

• This is a fantastic NPC overview of copay accumulators and maximizers, via Health Affairs Forefront. 

• The Medicare Part D benefit redesign is just weird, man. Ben Ippolito from AEI pawed through the new MedPAC report and highlighted yet another place where the law is creating twisted incentives. It turns out that the out-of-pocket cap is a lot lower when a patient’s Medicare plan is more generous, which provides another incentive for companies to shift more costs onto patients. 

• The endgame with the FTC and PBMs is complicated somewhat by the fact that one FTC commission has left and two were fired (even if the legality of those firing remains in dispute). The two remaining commissioners, the Republicans, both recused themselves from the PBM lawsuit that the agency filed. Fierce has the details. As with so much else right now, what this all means is somewhat cloudy. 

Cost Curve is produced by Reid Strategic, a consultancy that helps companies and organizations in life sciences communicate more clearly and more loudly about issues of value, access, and pricing. We offer a range of services, from strategic planning to tactical execution, designed to shatter the complexity that hampers constructive conversations. 

To learn more about how Reid Strategic can help you, email Brian Reid at [email protected].